Select Committee on European Scrutiny Twenty-Fourth Report


5 Excise duty on alcohol and alcoholic beverages

(25710)

9983/04

COM(04) 223

Commission Report on the rates of excise duty applied on alcohol and alcoholic beverages (presented pursuant to Article 8 of Council Directive 92/84/EEC on the approximation of excise duty on alcohol and alcoholic beverages)

Legal base
Document originated26 May 2004
Deposited in Parliament3 June 2004
DepartmentCustoms and Excise
Basis of considerationEM of 16 June 2004
Previous Committee ReportNone
To be discussed in CouncilNot known
Committee's assessmentPolitically important
Committee's decisionCleared, but relevant to the debate on general arrangements for excise recommended for European Standing Committee B

Background

5.1 Directive 92/83/EEC is concerned with harmonisation of the structure of excise duties on alcohol and alcoholic beverages and lays down how excise duty should be applied by Member States to alcoholic drinks. Directive 92/84/EEC is concerned with approximation of the rates of excise duty for alcohol and alcoholic beverages in the Community and lays down minimum rates of duty to be applied in Member States to alcoholic drinks. Under the second Directive the Commission is required to review the rates of excise duty periodically. The previous, first, report on this issue was in September 1995.

The document

5.2 Although Directive 92/84/EEC requires the Commission to report only on the rates of excise duty, the Commission has decided also to consider possible changes to the structure of excise duty in this document, as it feels the structure of taxation is closely linked to duty rates. In the first part of its report, dealing with rates of excise duty, the Commission considers four issues:

  • the functioning of the internal market. The Commission notes that there is an incentive for fraud if there is a high tax burden on products relative to their underlying value and significant divergences in rates of excise duty between some Member States. Whilst acknowledging some advantage to consumers of divergent rates, the Commission says increased approximation would go a long way towards providing a long-term solution to the internal market problems. But it notes also differing views among Member States on how this might be achieved;
  • competition between different categories of alcoholic beverages. The Commission reports that generally the extent to which different alcoholic beverages compete with each other is not a decisive factor in determining their rate levels, and that the demand for a beverage is relatively insensitive to changes in its own price or to changes in the price of competing types, although sensitivity increases in higher- taxing Member States;
  • the real value of the minimum excise duty rates. The Commission concludes that a re-valorisation of about 24% could be considered to reflect the inflation between 1 January 1993 and 31 December 2002. Whilst noting that such a re-valorisation is required in order to avoid minimum rates becoming meaningless over time, the rates are minima and Member States are free to set higher rates; and
  • the wider objectives of the Treaty. The Commission discusses the link between taxation of alcoholic beverages and health policy and agricultural policy. It notes that a majority of Member States do not usually take into account health policy considerations when fixing excise duty rates. On agricultural policy it says wine taxation — at present there is a zero minimum rate on wine —remains a very controversial issue. The Commission also notes that all new Member States undertook to apply rates at or above the minimum rates on 1 May 2004.

5.3 In the second part of its report the Commission considers two issues in relation to the structure of excise duties on alcohol and alcoholic beverages. These are:

  • whether to maintain the ability of Member States to apply different rates of duty to still and sparkling wine; and
  • how best to define and classify various categories of alcohol and alcoholic beverages for excise purposes. The Commission discusses particularly the confusion in classification of drinks, such as alcopops, made up of mixtures of "other fermented beverages" and spirits.

5.4 In conclusion, the Commission says it has chosen not to present at present a draft Directive on the basis of the review. Rather, it intends the report to launch a broad debate, the outcome of which would enable the Commission to decide whether to submit any proposals.

The Government's view

5.5 The Paymaster General (Dawn Primarolo) says:

"There are no direct policy implications at present, as the Commission has not produced a proposal for legislative change. As a general principle, the Government believes that Member States should be free to set duty levels according to their national circumstances and would challenge any proposals which undermined this, for example on the ending of the differentiation between still and sparkling wine for excise duty purposes."

Conclusion

5.6 This document discusses important, but sometimes technically complex, matters. If the debate it is intended to encourage prompts a legislative proposal from the Commission we will look to the Government to provide us with a clear and straightforward guide to the issues then raised.

5.7 Meanwhile we clear this document. But we note that, in so far as it discusses internal market and fraud issues, it is relevant to the debate on a Commission Report and draft Directive on general arrangements for excise which we have recommended for debate in European Standing Committee B.[21]


21   See (25532) 8241/04: HC 42-xxii (2003-04), para 1 (9 June 2004). Back


 
previous page contents next page

House of Commons home page Parliament home page House of Lords home page search page enquiries index

© Parliamentary copyright 2004
Prepared 7 July 2004